U.S. dismisses former employees’ complaint against Swatch Group

August 17, 2004byWilliam George Shuster

A complaint by two former employees against Swatch Group alleging tax evasion and harassment has been dismissed by the U.S. Department of Labor, the BBC reported on Aug. 16. Swatch Group, one of the world’s largest watchmakers and official timekeeper of the 2004 Olympic Games, confirmed it’s been told by the Labor Department that there are “no grounds” to pursue the complaint.

According to Aug. 13 reports in the Wall Street Journal and Financial Times, plus a Swatch Group statement, two former Asia-based financial controllers of the watchmaker accused the company of evading $180 million in taxes in several countries (including the United States) through “transfer pricing”—changing prices for products as they go through various subsidiaries—to shift profits from high-tax countries to those with low taxes.

In June, the pair filed a complaint with the Labor Department under the Sarbanes-Oxley Act (the U.S. law protecting workers who report corporate wrongdoing from harassment and discrimination). It alleged that after the two made their report to company officials, they were harassed and eventually had to leave the company.

Swatch on Aug. 13 denied the allegations, saying the complaint rose out of a “pure employment dispute” with the pair, and that its own internal investigation had found no wrongdoing.

A Labor Department spokesman told the BBC on Aug. 16 that since the men had neither been hired nor worked in the United States, and their allegations concerned actions outside the United States, their complaint wasn’t covered by Sarbanes-Oxley. A Labor Department official earlier said only the “employee-protection aspect” would be considered, “not the fraud.”

The two men have until early September to appeal the complaint’s dismissal.

Swatch Group’s annual sales topped $3 billion, and $393 million in profits, in 2003. Headquartered in Biel, Switzerland, the company owns 17 watch brands ranging from popular-priced to luxury (including Swatch, Omega, Tissot, Longines, Blancpain, and Breguet), a private label watchmaker, and ETA, a major producer of watch movements.